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Can you remember back ten months ago to January 31, when the Yahoo! (NASDAQ: YHOO) board (think Jerry Yang) rejected a $30per share offer from Microsoft Inc. (NASDAQ: MSFT). This buyout offer of $44.6 billion was made by the software giant to combine forces with Yahoo!, against the supposedly next evil empire, Google Inc. (NASDAQ: GOOG).That was so long ago when the DJIA was thousands of points higher and the current presidents administration was in full recession denial mode. A lot has happened since then.
Yesterday Yahoo! closed at $12.25 per share, about 60% less than the offer, while MSFT closed at $23.08, down about 20%. This is important because it means that if Yahoo! accepted an all stock offer, shareholders would be way ahead of the game and be collecting dividends.
Given recent economic market deterioration, and projections for even worse in 2009, previously unthinkable options are back on the table. Options emerging for Yahoo include selling it's advertising search engine to Microsoft, an idea floated months ago, and refocusing efforts on display ads.
Yahoo is still a major competitor in this arena. It's hopes of funding both types of advertising R&D and marketing to successfully compete with Google are looking more and more unrealistic. It has also been rumored for months that Yahoo is in talks to combine forces with AOL (owner of BloggingStocks) a division of Time Warner (NYSE: TWX). They need to do something. Perhaps someone on the board should make the point to the others that no decision is also a decision.
Anything that enhances Yahoo!'s strengths and brings in fast cash and new revenue is a big plus. Since Yahoo! did not want to sell the whole company to Microsoft they could sell a portion and buy themselves back at a great discount -- if they think they are worth it?
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of TWX.
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